Posts from September 2014

We visited the Guggenheim Museum in Bilbao earlier this week. They were exhibiting a video installation called The Visitors by Ragnar Kjartansson. It’s not easily captured in a YouTube video, but that’s the best I can do for all of you. Basically you walk into a big room and on every wall there is a video playing of a musician and each is playing a part in the song. You walk around and you hear the various musicians playing. It’s awesome. I loved it.

We have found that the best way to deal with policy makers and regulators when something new and threatening and dangerous looking comes around is to educate, educate, educate, educate. You can hire expensive lobbyists, you can try the “ignore and deal with it later” approach, and you can try operating in other more welcoming locations. But in our view the best approach is to take the time and effort to explain things, listen to the concerns, get the best and brightest minds involved to work things out together and come to the right answers.

It is in this spirit that a new organization called the Coin Center has launched. The Coin Center will be led by Jerry Brito who has done some of the best Bitcoin education and advocacy work in his former role at George Mason University’s Mercatus Center. So Jerry really won’t be doing anything new here. But he will be able to focus 100% of his time on this work and will have more financial and organization support to do it.

I would like to thank Alex Morcos of Chaincode Labs and Balaji Srinivasan of Andreessen Horowitz for all the hard work they did bringing the Coin Center to life. Without their persistence, I don’t think this would have happened.

USV is proud to be a financial supporter of the Coin Center along with a handful of the most active entrepreneurs and investors in the blockchain sector. We will be reaching out broadly to everyone who has an interest in this sector in the coming months to get involved in some way. Technologies such as cryptocurrencies, bitcoin, and the blockchain are important, fundamental, and will foster innovation for decades to come. We must make sure that policy makers and regulators are well educated and informed so that they will put forward policies that will accelerate the development of these technologies, not retard them.

Back in 2008 and 2009, probably because of our investment in Twitter, I was obsessed with looking at acquisition traffic from search and social and comparing the two. Here’s an example of a post I wrote at that time looking at the two channels and comparing them.

At some point, I became convinced that websites would eventually see more acquisition traffic coming from social than they were seeing from search, which was the king dog of Internet traffic at the time. It was a hotly debated issue but, again maybe because of how long we were on Twitter, I was convinced social would be king some day.

I stopped obsessing about that issue sometime around 2010 and moved on to mobile as the thing I thought about and wrote about the most.

But today, when I was looking to see if the traffic to AVC had declined a lot while I have been away and blogging about all sorts of non work stuff (it hasn’t), I saw this chart of year to date acquisition traffic to AVC.

Social, and for AVC that means Twitter and Disqus, brings 23% of the visits to AVC. Search brings less than 20%. And it’s been that way for a long time now. Well over three years.

It’s kind of funny to think that we wondered and debated about such things back in 2008 and 2009. It’s not a debate any more and its not something to wonder about. It’s reality now.

Our portfolio company Coinbase announced something yesterday that went largely unnoticed, but might be one of the most important things to happen in the Bitcoin space in a while.

They put out a bunch of developer tools under the name Toshi, including a full open source version of their Bitcoin node. When you combine Toshi with the core Bitcoin APIs it comes with and the Coinbase APIs, you get a platform for building Bitcoin applications that is unmatched in the market.

The reality is building on top of the Bitcoin Core is not a simple task. There is a lot you need to do to make it work. Coinbase has been building on top of the Bitcoin Core for over two years and has addressed many (most?) of the obvious needs and they are now making all of that technology available to developers who want to build Bitcoin applications but don’t want to get knee deep in the Bitcoin Core.

Regular readers know that I’m a huge fan of Bill’s. He’s as smart as they come and I generally agree with him on things. As I was reading the WSJ piece, I found myself nodding my head and saying “yes”, “yes”, “yes”.

The thing I like so much about Bill’s point of view is that he does not focus on valuations as a measure of risk. He focuses on burn rates instead. That’s very smart and from my experience, very accurate.

Valuations can be fixed. You can do a down round, or three or four flat ones, until you get the price right.

And they are indeed sky high all over the US startup sector right now. And our portfolio is not immune to it. We have multiple portfolio companies burning multiple millions of dollars a month. Thankfully its not our entire portfolio. But it is more than I’d like and more than I’m personally comfortable with.

I’ve been grumpy for months, possibly for longer than that, about this. I’ve pushed back on long term leases that I thought were outrageous, I’ve pushed back on spending plans that I thought were too aggressive and too risky, I’ve made myself a pain in the ass to more than a few CEOs.

I’m really happy that I’m not alone in thinking this way. At some point you have to build a real business, generate real profits, sustain the company without the largess of investor’s capital, and start producing value the old fashioned way. We have a number of companies in our portfolio that do that. And I love them for it. I wish we had more.

Back in February, I wrote about our investment in Sidecar. At that time, Sidecar had recently launched a marketplace model where riders can choose the drivers they want to ride with. That model has proven very popular and Sidecar’s ride volumes grew significantly after it launched. Sidecar followed up that innovation with the launch of Shared Rides this summer and is already matching thousands of shared rides every week in San Francisco.

The tech industry has grouped many different apps under the label ridesharing. The name comes from the idea that anyone can be a transportation provider by taking out their car and giving rides via an Internet network powered by mobile apps in both the driver’s and rider’s hands. That is not really how most of these networks work. In reality, what we have seen develop is a new form of a limo service powered through technology. That isn’t really ride sharing.

And to take it a step further, if there is only a single passenger in the car, that’s not really ridesharing either. True ridesharing would be me taking out my car from my garage, powering up my Sidecar driver app, and accepting rides in which as many people as possible pile into my car and I take them all where they want to go. That’s the most efficient and highest form of utilization for my car and my time and will lead to the lowest cost rides for the passengers (and the most money for the drivers).

If we really want to reduce the number of cars on the road and make ridesharing a game changer in the transportation market, we need to see a model develop where anyone can be a driver whenever they want to drive and as many people as is safe and comfortable can get in the car with the driver and get where they want to go.

That is what Sidecar is building. That is the vision they had when they started the Company, that is the vision they had when we invested last year, and that is the vision they continue to pursue.

I am very excited by the potential of Shared Rides. I don’t really see any other way that regular people who can spend a few dollars, but not tens of dollars, every day to get to work, can take advantage of ridesharing. The leaders in this market can subsidize prices and cut fees for their drivers as much as they want. But that’s not sustainable. What is sustainable is increasing the utilization of the car as much as possible. That’s Shared Rides.

At USV, we are very excited about Shared Rides and Sidecar’s commitment to rolling out Shared Rides in every market they operate in and then expanding the markets they operate in. We’ve co-led a round with our friends at Avalon and Richard Branson which the company has announced today.

We drove early this morning from Barcelona to San Sebastian. To be more accurate, the Gotham Gal drove and I sat in the passenger seat amazed at the vastness of the landscape where for large parts of the drive there was 20 to 30 kilometers between towns. It was desolate and a bit depressing for someone used to seeing a new person every ten feet in NYC.

We got to San Sebastian in time for lunch. After checking into our hotel, we walked to the beach where there were boat races going on, and then walked into the old part of town in search of lunch.

It being Sunday afternoon, the streets were mobbed.

We found a few tapas bars that looked good and pushed our way in, and I do mean push. Eating in these bars on a sunday afternoon is a full contact sport. I was thinking I could have used some shoulder pads.

Here’s a selfie I took in one of the bars we pushed our way into.

In each bar, we got a beer to split and one or two tapas.

While it was work, and we had to push and shove a few times, the payoff was well worth it.

We got this Pulpo A La Planxta Con Membrillo in the first bar we went to.

And we got this grilled shrimp bruschetta (although they call it something slightly different here) in the second one we went to.

We are going back to the bars tomorrow night for more contact sport. I have to say it’s a lot of fun.

Our portfolio company CircleUp, a crowdfunding market for equity investments in consumer products companies, launched something this week that I think is a something we will see more and more in the crowdfunding world going forward.

I decided to filter for food companies in New York that have more than $500k of annual revenue. That got me three results:

Whether it is equity for consumer products (CircleUp), equity for tech startups (AngelList), consumer lending (LendingClub), small business lending (Funding Circle), philanthropy (CrowdRise), or creative projects (Kickstarter), all of these crowdfunding marketplaces have a tremendous amount of things to fund. Drilling down to find exactly what you want to fund is becoming harder and harder. Discovery tools are becoming critical to the user experience.

So I think CircleUp is showing one good way (another is social discovery which Kickstarter does a good job with) to help funders find the things they want to back. My bet is we will see more of these kinds of tools cropping in up in the marketplaces in the coming year(s).

Today is a very meaningful day for all New Yorkers. For me, the terrorist acts of September 11, 2001 came at an important time in my life. The Internet bubble had burst and my professional life was all about dealing with the ramifications of that. I had just turned 40, we had three kids, 10, 8, and 5. We had lived in NYC for almost 20 years and we were building a life in the greatest city in the world. That day changed everything and changed nothing at the same time. We stayed downtown, we raised our kids in the post 9/11 NYC, and we still live in NYC in much the same way we lived there before that day. But we were all impacted by the sights, sounds, and smells of that day and the days and weeks that followed and certainly still are.

I don’t think much about September 11th anymore but I do try to remember it every year on its anniversary.

We are in Barcelona today. September 11th means something very different here. It is the “national day of Catalonia” and a holiday.

To make things even more interesting the Catalan Separatist Movement is mounting a huge protest today in Barcelona and they are expecting 1.5 million people to fill the two main streets in town and create a V sign in an effort to pressure Spain to allow a vote for Catalonia to secede.

The streets are literally filled with people wearing the yellow and red colors. We walked around for a couple hours and observed the goings on.

There are separatist movements cropping up all over Europe right now. I imagine the weak economy and rampant unemployment is a factor but underneath it all these are tensions that have existed for centuries and it’s not really a new thing at all.

The hatred that fed the horrible acts of 9/11 isn’t a new thing either. The techniques are modern and so are some of the resentments that feed it but the underlying hatred goes back a long way.

So for me, today is a reminder that conflict and resentment and the hatred that can result is a permanent human condition. We can work to minimize it and we should do that tirelessly. But we are unlikely to eliminate it.